SBI chief sees no need for blanket extension of EMI moratorium
State Bank of India (SBI) is not concerned too much regarding the pile-up in bad debt due to the pandemic, and sees no need for a blanket extension of the moratorium for every sector.
“I don’t want to sound too optimistic on the NPA front but based on the analysis of our book, I am not over-worried,” SBI Chairman Rajnish Kumar said at SBI’S flagship Banking and Economics Conclave.
While he admitted that NPAS were difficult to predict, considering only data of SBI “it seems to be a very manageable situation”.
People are largely paying up, especially in retail. SMES have also started paying. The case for corporates, however, is interesting as companies have enough liquidity but want to preserve cash for now.
Certain sectors definitely need help, especially those that came into the crisis without shedding their leverage. In the past 4-5 years, most companies have shed their leverage, and banks have increased their provision coverage ratio.
According to Kumar, the 6month moratorium is in itself a kind of mini-restructuring. Further extension could be sought sector-wise, or on a caseto-case basis, but not for all.
“The aviation sector needs help, but not everybody,” said Kumar. Rather, if a corporate could give a picture of its cash flows, “only then any repayment pause or deep restructuring can be done”.
Ronojoy Dutta, CEO of Interglobe Aviation, concurred with the SBI chairman. According to Dutta, 40 per cent of airlines’ costs are fixed, and therefore, when Indigo was not flying, it was burning ~40 crore a day.
That number has reduced as airlines have resumed flying, but he did not disclose the daily losses being incurred by airlines. For now, occupancy rate could be 30 per cent, but there has been an increase in demand.
Demand hit and job losses have hit hard, and the economy may take at least three years to revive. According to Sunil Kant Munjal, Chairman of Hero Enterprises, the prospect of job losses is “quite scary” and can reach upwards of 20 per cent.
“We have not thought about the social fallout. Small and mid-sized companies are scared to bring people back,” said Munjal.
Munjal’s prescription is to industrialise rural areas so that jobs are generated, and to raise India’s competitiveness on a global scale. “Govt must be prepared to give at least two more fiscal packages,” Munjal said.
Predicting that the economic recovery could be U-shaped, Piramal Industries Chairman Ajay Piramal said it was paramount for the real industry to be given special care by authorities. Slashing of realty prices won’t make a difference as people will not be interested in investing in real estate.
“Real estate is what drives the economy. Even unskilled people get employment. More than 250 industries are related to real estate,” Piramal said.
He also noted that private lenders and MFS must lend to the NBFCS. Liquidity issues have been addressed by the RBI and the government, but only better-rated NBFCS have been able to raise money.
Ashu Suyash, MD and CEO of CRISIL, said the situation was not as grim as in the early 90s, despite the uptick in NPAS.
“Per se, the economy is in better place. It is much more resilient. Sure, there will be an uptick in cases and it’s not pandemic-induced,” said Suyash.
According to Suyash, with slowing consumption, employment will be hit. In the ~12-trillion universe of CRISIL-RATED firms, there is vulnerability in 52 per cent of the firms by size and 68 per cent by volume.
The SBI Chairman said the government must concentrate on infrastructure spending as that would create jobs. However, he was not too hopeful of private investment as there was not much visibility on demand revival for nonessential goods.